Three prominent Democratic lawmakers are urging federal and state authorities to investigate a major student loan company accused of “loan forgiveness mismanagement.” Senate Majority Leader Chuck Schumer, along with Sens. Elizabeth Warren and Bernie Sanders, issued a joint statement calling for scrutiny into MOHELA, a federal servicer based in Missouri responsible for managing the Public Service Loan Forgiveness portfolio.
Allegations and Response
The call for investigation comes in response to a report released by the Student Borrower Protection Center and the American Federation of Teachers. The report, based on internal documents obtained through Missouri’s Sunshine Law, highlighted concerns regarding MOHELA’s handling of student loan repayment processes. Among the issues raised were strategies outlined in MOHELA’s “return to repayment playbook,” which reportedly hindered borrowers’ ability to reach customer service representatives.
In their statement, the lawmakers expressed outrage over what they described as “denied services to millions of hard-working borrowers” and urged the Consumer Financial Protection Bureau (CFPB) and state attorneys general to take action. MOHELA, in response, refuted the allegations, denouncing them as a distortion of facts intended to mislead the public. The company explained that it was following directives from Federal Student Aid to encourage borrowers to utilize self-service options amid a surge in call volumes during the return to repayment period.
Scrutiny Over Servicer Performance
The resumption of student loan payments in October, after a three-year hiatus, has drawn increased scrutiny to the performance of federal loan servicers. The Education Department’s decision to withhold payments from MOHELA, amounting to over $7 million, underscored the challenges borrowers faced, including inaccurate billing statements and improper forbearance statuses. Similar actions were taken against other federal servicers in January, signaling broader concerns within the industry.
Calls for Oversight
Prior to the recent call for investigation, lawmakers, including Senator Warren, had raised concerns about MOHELA’s billing communications and transparency. While the Education Department has pledged to maintain oversight over servicers, including potential consequences for contractual breaches, calls for additional scrutiny persist. The CFPB’s stance on launching an investigation into MOHELA remains unclear at this time.
As the debate over student loan servicing continues, the demand for accountability and transparency from loan servicers remains a top priority for lawmakers and advocacy groups alike.
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